Korean Car Makers Race for Third Place

The new Hyundai Motor Co. Sonata sedan stands on stage during an unveiling ceremony in Seoul, South Korea, on Monday, March 24, 2014.

Bloomberg

In South Korea’s automobile market, the fiercest battle isn’t for first place, but for third.

Hyundai Motor and its affiliate Kia Motors have dominated the auto market in the country for years and claim the No. 1 and No 2. spots respectively, with a combined market share of 80.3%.

GM Korea, a unit of General Motors, holds 10.2% of the market, putting it in third place, but competitors are revving up to challenge it.

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The latest company to take aim at GM Korea is also the least likely: Renault Samsung Motors, which currently is the country’s smallest auto maker by sales. The South Korean unit of French auto maker Renault said on Wednesday that it expects to overtake GM Korea and fourth-place Ssangyong Motor in 2016 by increasing sales by at least 70%. That would mean it needs to sell 222,717 vehicles in the target year, up from 131,010 units sold in 2013.

“We have completed the first phase of recovery in the past two years and we’re undergoing the second phase. Our market share is increasing and I see a great potential here,” Carlos Ghosn, chief executive of the Renault-Nissan car-making alliance, said at a press conference in Seoul, where he promised active support for the Korean unit.

A Renault Samsung Motors Co. SM3 Z.E. electric vehicle sits on display at the first International Electric Vehicle Expo in Seogwipo, Jeju, South Korea, on Sunday, March 16, 2014.

Bloomberg News

Renault Samsung posted its first full-year net profit of 17 billion won ($16 million) in 2013 after reporting losses in the previous two years. The company said it will bolster sales of the QM3 compact sport-utility vehicle by importing more of the vehicles from its overseas plants to meet rising demand in Korea. It also plans to launch a diesel-powered model of its flagship SM5 midsize sedan later this year.

The target, however, is a challenge for the underdog because its two immediate rivals are also faring well, or perhaps better.

Ssangyong, which specializes in SUVs, posted a 26.4% increase in sales in the first quarter, the strongest sales growth among the five auto makers in the period.

GM Korea’s new Chevrolet Malibu Diesel.

GM Korea

GM Korea, for its part, is also gaining ground, mostly by taking market share from its bigger rivals. Last year, it posted record sales of 151,040 vehicles in Korea, helped by the local introduction of its global Chevrolet brand in 2010.

For better or worse, the five South Korea-based auto makers have common enemies — imported cars.

Local sales of foreign luxury cars, particularly those familiar German names such as BMW and Mercedes-Benz, have maintained double-digit growth for months, rapidly encroaching on their Korean rivals.

“Imported cars will easily take up at least 20% in the next few years unless the Korean car makers produce more attractive models in terms of both quality and price,” said Kim Tae-nyen, executive director at the Korea Automobile Manufacturers Association.

Imported cars currently account for nearly 15% of the domestic market, up from a mere 2% a decade ago.